Third Eye OSINT publishes enlightened commentary on geopolitics. The articles will always reflect a pro-American personal viewpoint, because the author is a loyal citizen of the United States of America. This blog is a wholly-owned project of Alfidi Capital.

Russia controls Crimea. The rapid deployment of airmobile forces and subversion of Crimean political institutions presented the world with a fait accompli. The pending referendum on Crimea's future presents voters with little choice, because the only ballot alternative to a union with Russia is a return to autonomous status under a Ukrainian constitution that is no longer in force. The world must now consider Russia's further options.

The Crimean peninsula is heavily dependent upon Ukraine for water and energy. Ukraine claims Russia has already launched an incursion into Strelkova (Strilkove) from the Crimea. The seizure of a "natural gas station" is probably a warning to Ukraine that it should not interfere with the resource links that feed Crimea. There is no evidence from open source reporting that Ukrainian military units were able or willing to repulse this incursion. This lack of resistance will embolden Russian commanders to make further incursions. The decision of one regional commander to send a combined arms task force to secure a location outside his unit's defined area of operations indicates that other Russian commanders possess similar freedom of initiative. Ukraine's options for mitigating Russian freedom of maneuver are limited. Reducing water flow from the North Crimea Canal through the Isthmus of Perekop would hurt all Crimeans and invite a Russian attempt to seize the Kakhovka Hydroelectric Power Plant that controls the Kakhovka Reservoir feeding the canal. Third Eye OSINT assesses the Kakhovka Hydroelectric Power Plant to be a critically important infrastructure node. Control of this node ensures control of Crimea.

Capabilities and intent indicate a most likely course of action. Unopposed Russian incursions outside of Crimea indicate the occupying force's ability to seize critical infrastructure at will. Moscow's declared interest in ensuring the safety of Russian language speakers anywhere in Ukraine is an expansive statement of intent. It is therefore very likely that Russia will launch armed incursions into eastern and southern Ukraine.The Carnegie Endowment noted that Russian forces' initiative and tactical maskirovka have succeeded in achieving dominance. Third Eye OSINT notes that this success has come partly due to very restrictive rules of engagement for Russian forces in Crimea that have blockaded Ukrainian forces in their garrisons. Pro-Russian partisans intimidating Crimeans and foreign journalists show no such restraint. It is therefore likely that Russia will continue to employ a combination of cooperative local "volunteer" provocateurs and military units under very restrictive rules of engagement to take control of Russian-leaning parts of eastern and southern Ukraine. Temporary incursions and unrest may be sufficient to exert a level of control over parts of Ukraine that offers Russia more strategic options in engaging the West.

Tuesday, March 11, 2014

Africa still wrestles with its colonial legacies. Pierre Englebert's State Legitimacy and Development in Africa discusses illegitimate states whose modern functions are not contiguous with their pre-colonial functions, partly due to artificially drawn borders. Their seemingly interminable corruption and inefficiency stem from the difficulty of managing these borders. These states expend enormous resources supporting themselves instead of funding vital public goods. State corruption precludes African entrepreneurs from counting on a fair shake from their own leaders. This provides a window into what is going right in Africa.

Africa has room to grow. The World Bank's data for Sub-Saharan Africa shows that it lags behind the MENA region in GNI per capita and life expectancy. MENA's oil-producing countries have their own problems with artificial borders and corruption yet they outperform their southern neighbors. The oil wealth of the MENA region is not the only explanation for its advantage over the rest of Africa. A large number of the World Bank's heavily indebted poor countries (HIPC) are in Sub-Saharan Africa. None of the developing MENA countries appear in the HIPC group. The explanation for the development differential between MENA and Sub-Saharan Africa isn't as simplistic as the presence of oil in the north and the burden of debt in the south. Knowing that this disparity exists provides a context for national developmental goals; resource-rich African countries can export their way to success rather easily, while debt-burdened countries cannot. This developmental gap needs further analysis.

Africa has the multilateral institutions it needs. The African Union and African Development Bank speak for the continent. Whether they speak for corrupt autocrats or ordinary Africans is up for debate. State illegitimacy casts doubt on the ability of officials to push true development agendas without lining their own pockets. Bottom-up agendas can build credibility in areas that top-down agendas can't reach. Bankers Without Borders' Sub-Saharan program has completed multiple microeconomic assessments that allow investors to bypass dysfunctional state programs. This philosophy supports the Center for Financial Inclusion's FI2020 goal of maximizing the participation of developing country citizens in the world's financial markets. Even the UN Research Institute for Social Development recognizes the importance of non-state mechanisms for socioeconomic development.

Africa has the culture and infrastructure for innovation. Nigeria's "Nollywood" produces more movies than the US. The New Partnership for Africa's Development (NEPAD) is like a hybrid of the US's own intergovernmental bodies devoted to innovation. The Africa Finance Corporation channels investors into infrastructure projects, although its initial capital and membership are limited. A Google search of that organization with the word "corruption" reveals some troubling early stories of mismanagement.

The World Bank's data on value-added manufacturing reveals that Africa's efforts at developing a hi-tech economy have not yet borne fruit. The Excel data download comes in handy for regional comparisons. Both the MENA and Sub-Saharan regions trail the US and world averages for the portion of the economy devoted to value-added manufacturing. Interestingly, both regions do track fairly closely to the numbers for the HIPC group. If manufacturing doesn't differentiate MENA from Sub-Saharan Africa, then resource extraction is probably the key difference between those regions.

Development usually follows a clear pattern in the life of most nations, and it is hard to skip from agriculture and extractive sectors directly to high-tech innovation. The US and Germany were large agricultural producers whose exports produced excess capital available for investment in manufacturing. Many African nations have abundant natural resources. They need leaders with the foresight to convert resource exports into capital surpluses for their domestic tech sectors. The UN's Global Pulse reports on Big Data in development can show African leaders how to leverage their countries' unique gifts.

Thursday, March 6, 2014

Two distinguished geopolitical scholars presented their analysis of "China's Rise and the Global Resource Game" at the World Affairs Council of Northern California tonight. I have not yet read their companion book By All Means Necessary but now it's on my list. I have read the China National Development and Reform Commission (NDRC) mission statements. Read them yourselves to see the Politburo's strategic intent. China's leadership absolutely believes the quest for resources bolsters its security, and that it must pursue a stronger security posture to obtain the commodities it needs. The two are so intertwined that any outside attempt to interfere with one pursuit will imperil the other. This is the fundamental fact that the West and China's Asian neighbors must understand when dealing with China.

China's energy quest does not stop with coal, and China analysts could do more to explain the country's challenges developing hydropower, natural gas, and solar technology. China is determined to dam the Mekong and other major rivers, with little regard for the water needs of its downstream neighbors. Refer to my previous Third Eye OSINT analysis of water security, and note my discovery that China does not participate in transboundary water management (TWM) mechanisms. I will restate my belief that the US can play the role of honest broker in Asia. It may have already begun to play this role. Witness this agreement between China's NDRC and the US EPA. The US is trying to align China with international norms mitigating climate change. The next logical step is to help China build the capacity for settling disputes peacefully with its neighbors in ways that do not disrupt Asia's water-energy-food security nexus.

I sometimes chuckle to myself when analysts outside the mining sector try to describe China's rare earth element (REE) mining policies. I gave an interview to the Gold Report in December 2011 on rare earth metals, and I predicted that China's ability to produce REEs would have more to do with global demand than with its export quotas. The markets proved me to be correct in 2012. The world prices of rare earth metals plummeted that year and have remained low. Investors who went all-in on REE stocks at the top of that bubble have been hurting ever since. China keeps its export quotas just high enough to exceed expected global demand, while it uses environmental laws as a stalking horse to consolidate domestic production and shut down underperforming mines.

I blogged about my experience on the TREM12 panel in March 2012, where I further elaborated on my REE market analysis in front of Washington DC policymakers and mining industry big shots. I will continue to toot my own horn on this subject because the halls of power can benefit from my genius. I'll boil down China's basic REE strategy in a nutshell. The fact that China mines over 95% of the world's REE product is less important than the fact that it owns 100% of the world's oxide and concentrate refining capacity. Even REE ore mined outside China must still be shipped to China for the final metallurgy that turns it into specialty alloys for industrial use. Digging new REE mines in Canada and elsewhere gives the West little strategic leverage without a multi-year investment in the processing capacity and engineering knowledge that breaks China's real monopoly. Full disclosure: I have a small equity investment in a privately held company that is attempting to break this monopoly by establishing a world-class REE processing facility in North America. I put my money where my mouth is because I am all about solutions.

It looks to me like the People's Republic of China is a stronger state than the Russian Federation almost across the board. Russia is slightly higher on Freedom House's scale but both countries are pretty much in the basement on that metric. Adding more metrics can provide a fuller illustration.

I like hearing from the World Affairs Council's guests, especially when they come all the way out to San Francisco from the Council on Foreign Relations. Now it's their turn to hear from me. I would be overjoyed to add my own perspectives to the CFR's deliberations if someone would be generous enough to sponsor me for membership. The CFR needs market expertise that bolsters its geopolitical bench strength. Come and get it from Yours Truly, Anthony J. Alfidi, aka "Greatest Man Who Ever Lived."

The Clinton Administration negotiated the Agreed Framework in the 1990s with the Kim family regime. The IAEA had already discovered that the DPRK was in violation of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT). Negotiating in good faith with a regime proven to break faith with agreements is thus an exercise in futility. This wisdom is lost on Western diplomats who think Oriental despots can be trusted to keep their word. The Agreed Framework itself allowed lopsided US concessions to the DPRK and next to nothing in return. What little the DPRK promised was renewed adherence to the NPT, which of course it later abrogated with nuclear tests.

I am profoundly disappointed at the immaturity of key US diplomats who were witness to this willful negligence of US strategic interests in the 1990s. Political determination to pursue a questionable diplomatic goal should be grounds for career diplomats to raise strenuous objections. It is difficult to describe the Clinton Administration's policy toward North Korea as a success given the high costs the US paid for the illusion of progress toward normalization. JPAC's ability to dig up the North Korean countryside for US servicemembers' remains depended on millions of dollars in aid incentives. The Bush Administration was still releasing funds to North Korea in 2002 under the Agreed Framework, even though it declined to certify the DPRK's compliance. North Korean intransigence shredded what remained of the agreement. Competent diplomats could have seen that coming based on North Korea's demonstrated diplomatic record of duplicity.

Independent assessments of light water reactors (LWRs) make it clear that they can still produce weapon-grade plutonium. The GAO's EMD-79-15 report made it clear during the Carter administration that light water reactors were not proliferation-proof. This NPEC study from 2004 is similarly clear on LWRs' Pu capability. The IAEA-SM-367/15/08 paper also made this clear. Any competent diplomat could have leaned on the US intelligence community's technical specialists to confirm that a gift of an LWR to a hostile state will not hinder nuclear weapons development. American diplomats should not view strategically questionable agreements as resume builders, time fillers, full employment programs, or bestseller book material. Unfortunately, that is the Agreed Framework's legacy.

Coercion could have succeeded in curtailing the DPRK's nuclear ambitions where the Agreed Framework failed. North Korea's Room 39 (or Office, or Bureau, or whatever) is the Kim dynasty's primary source of slush fund revenue from illicit activities worldwide. The Bush Administration launched a comprehensive plan to take apart Office 39 but for some reason never completed it. Comments on several websites that summarize reports from North Korean defectors are revealing. Some of these comments indicate that this US effort to shut off North Korea's illicit funding forced the Kim family to make policy changes. The Kims and their entourage approach all foreign dealings, including diplomatic efforts, as a matter of personal survival. The Kim dynasty cannot maintain its extravagant lifestyle, its bribes to internal KPA and WPK factions, and its WMD programs without illicit sources of foreign funds. Third Eye OSINT is convinced that a serious effort to shut down Room 39, its successors, and other Kim regime extralegal funding mechanisms remains the most promising US interagency option for eliciting diplomatic compliance from the DPRK leadership.The US Treasury designated two banks as nodes of Office 39 in 2010. It's good to know that at least one US agency is keeping up the pressure.

Any claim that the US is unable to monitor North Korean compliance with nonproliferation accords is very difficult to believe. The US has long maintained national technical means that enable it to monitor Russia's nuclear arsenal. This surveillance, together with IAEA physical site visits, has been sufficient to catch North Korea in the act of violating its agreements. The US does indeed lack a diplomatic capability to assess the intent of leaders in closed societies. Diplomatic scholars should revisit classical works on Confucian thinking to recognize the ancestor worship and other forms of filial piety the Kim regime demands of its people. The dead hand of old thinking is alive and well in North Korea.

The US tends to mishandle its relations with at least one of the two Koreas at any given time. Misguided diplomatic openings to the North risk alienating the South. It stands to reason that South Korea should be the lead international actor in dealings with its forlorn northern twin. The Republic of Korea has matured into a modern democracy that ranks very high on numerous global measures of health. The Democratic People's Republic of Korea ranks at the bottom on almost every conceivable measure. The US's wisest move would be to defer to its strong ally South Korea in all future negotiations with North Korea. Koreans understand their kin better than US diplomats who pursue negotiations for their own sake.

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Yet Another Disclaimer

Third Eye OSINT is written and maintained exclusively by Anthony J. Alfidi. The opinions expressed here are solely those of the author and do not represent the official or unofficial position of any government entity. The information presented here is drawn solely from unclassified, open sources available to the general public. In other words, I wrote this stuff.